Fuel supply contracts of steel and cement companies with CIL to continue

A senior government official said the fuel supply agreements of companies in non-power sectors like steel and cement are not proposed to be ended prematurelySarita Singh | ET Bureau | November 03, 2015, 15:00 IST

NEW DELHI: The fuel supply contracts of steel and cement companies with Coal India Ltd (CIL) will not be discontinued for auction.

This comes as a big relief to the companies as the government had earlier announced that all the coal supply agreements between Coal India and non-power firms will end on June next year.

A senior government official said the fuel supply agreements of companies in non-power sectors like steel and cement are not proposed to be ended prematurely.

The government will wait for the contracts to end and then auction them. This is a change from the government's earlier stance to discontinue the agreements and auction them afresh next year.

Most fuel supply contracts of Coal India are set to lapse in 2017. The official said the government is expected to auction about 28 million tonne of coal supply pacts to unregulated sectors next year.

The coal ministry has finalised the policy for auction of Coal India contracts to unregulated sectors like steel and cement that will be tabled before the Union Cabinet for approval within a month, the official said.

The private steel and cement firms will have to indicate their coal requirement and their enduse projects to the coal ministry before bidding for supply from Coal India Ltd. As per the proposal, separate bidding will be held for cement, iron & steel, aluminium and fertiliser plants.

The coal ministry has also committed to reserve coal for auction to the unregulated sectors like steel and cement out of Coal India's incremental production every year. This has been done to avoid desperate bidding by private firms in the upcoming round of bidding for coal supply from Coal India.

As per the proposed mechanism, Coal India will invite bids from companies for supplying a fixed quantity of coal at a floor price. Once bids are received, the state-run miner will increase the floor price till the demand and supply reach the same level.